Growing your business through exporting

Exporting overseas is an exciting opportunity for your business. Before you start, researching your market and understanding risks will improve your chances of success.

1. Understanding your export market

If you've identified an opportunity overseas, having an in-depth understanding of your market will help you decide whether exporting your product is a good idea.

Take a closer look at the market - how big is the opportunity? Are there any competitors and what will customers be willing to pay? Comprehensive market research is a key step to deciding whether exporting is viable.

You should also see if any prohibitive trade embargoes or sanctions are in place. Socio-political unrest or ongoing economic instability could make exporting more of a risk. Legal requirements, such as liability insurance and complying with local regulations, should be considered too.

2. Getting access to your market

Being able to deliver and sell your product thousands of kilometres away requires a network of partners - from banking to shipping to distribution. Finding the right partners to work with is essential, because a smooth supply line will invariably lead to cost benefits.

Nothing beats visiting the market you plan to export to, so you can see for yourself the infrastructure, roads, customs, logistics and other obstacles that your product will have to negotiate. There are also a number of Kiwi organisations who can help you understand your shipping and distribution options, as well as help you follow best practice and avoid exporting pitfalls.

KEA is a global network of over 500,000 Kiwis and friends of New Zealand, with a useful business directory which can put you in touch with companies who may have experience in the market you plan to export to

Export New Zealand, known as the 'voice of exporters', is a supportive network of like-minded business people, who can share trading experiences and provide helpful contacts

3. Being fit for exporting

Exporting overseas can create new logistical and financial challenges for any business, so it's worth answering a few questions to see if your business is in shape to begin exporting its products.

Can you meet capacity?

Satisfy yourself that your business has the ability to produce larger quantities of product and that your suppliers can scale up to meet your increased demand. As well as making sure you have the finance to fund this increased volume, it's also important to have a plan to cope with success; nothing is more frustrating - or potentially harmful to your business - than turning away orders.

Are you financially robust?

Although exporting creates a larger market with greater possible returns, the extended period between production and payment for goods can also create a funding gap. There are two ways you can lessen this impact:

Increase your working capital - cash reserves and investment from partners or investors can cover short term deficits. Alternatively, business loans or lower-rate trade finance loans can help with an extended payment cycle

Are your transportation plans shipshape?

Choosing the right shipping method, understanding customs requirements and having a contingency plan will help you move your goods smoothly.

Typically, container ship transportation is better for larger volumes and is less expensive, but slower. Air freight is suited to lighter or perishable goods, is faster, but more expensive.

4. Customs restrictions

Check that there are no restrictions or special tariffs on your goods, and confirm which countries your goods will travel through. You also need to decide who will lodge the paperwork with customs (usually the exporter). Both New Zealand Customs and the Ministry of Foreign Affairs and Trade (MFAT) can provide information on tariffs, duties and free trade agreements.

Plan for delays and unforeseen circumstances, as these can happen; having a contingency plan in place will ensure you can meet your contractual obligations.

5. Managing risk

Letters of Credit

Letters of Credit from the importer's bank gives you confidence to supply because the bank will guarantee to pay any outstanding amount in the event of non-payment. Having this additional comfort can give you the confidence to extend credit terms to the buyer, helping them to grow with you

Collection documents

For additional peace of mind, your bank can help to control the release of goods by arranging for the importer's bank to hold the collection documents. They will only release the documents to the buyer once they have made payment arrangements and the funds are available to you

Bank guarantees

Payment delays and geographical distance can affect exporter and buyer confidence, so having bank guarantees provides assurance by vouching for the stability of your business as well as your ability to make a payment

Insurance

You can insure against two of the biggest concerns: damage to goods in transit and non-payment. To protect against these risks, ASB can introduce you to specialists in marine insurance and trade credit insurance

A product disclosure statement (if applicable) and QFE disclosure statement is available on request and free of charge from your Relationship Manager.

This page is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and should not be relied on. This information has been prepared without considering your objectives, financial situation or needs. We recommend you seek independent professional advice and contact Inland Revenue before acting on this information.